Q3 2017 Sampo Oyj Earnings Call
Nov 02, 2017 AM EDT
SAMAS.HE - Sampo Oyj
Q3 2017 Sampo Oyj Earnings Call
Nov 02, 2017 / 02:00PM GMT
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Corporate Participants
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* Jarmo Salonen
Sampo Oyj - Head of IR & Group Communications
* Kari Henrik Stadigh
Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance
* Peter Johansson
Sampo Oyj - Group CFO
* Ricard Wennerklint
Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd
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Conference Call Participants
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* Blair Thomson Stewart
BofA Merrill Lynch, Research Division - Head of the UK and European Insurance
* Ida Melvold Gjosund
Carnegie Investment Bank AB, Research Division - Research Analyst
* Matti Ahokas
Danske Bank Markets Equity Research - Head of Equity Research of Finland
* Michael Igor Huttner
JP Morgan Chase & Co, Research Division - Senior Analyst
* Paul De'Ath
RBC Capital Markets, LLC, Research Division - Analyst
* Per Gronborg
SEB, Research Division - Research Analyst
* Steven Haywood
HSBC, Research Division - Analyst
* Thomas Seidl
Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst
* Vinit Malhotra
Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst
* Wajahat Rizvi
Deutsche Bank AG, Research Division - Research Analyst
* Youdish Chicooree
Autonomous Research LLP - Research Analyst
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Presentation
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Jarmo Salonen, Sampo Oyj - Head of IR & Group Communications [1]
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Ladies and gentlemen, welcome to this conference call on Sampo's Third Quarter 2017 Results. I'm Jarmo Salonen, Head of Investor Relations at Sampo, and with me, here at the studio, I have our Group CEO and President, Kari Stadigh; Group CFO, Peter Johansson; and Deputy Head of P&C business, Ricard Wennerklint. We'll have the same procedures as normally, Kari will start with the summary of Q3 developments and then we'll take your questions. Before handing over to Kari, let me remind you that you can follow this call on our website, sampo.com/results, and a recorded version of the call will later be available at the same address.
With these words, I'll hand over to Kari. Kari, please.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [2]
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Thank you, Jarmo. Welcome to the conference call on my behalf as well. It's really pleasing to report a strong third quarter, where the insurance results compensated well for the dip in the Nordea results. Profit before taxes was up 6% to EUR 475 million, not taking into account the positive one-off from the consolidation of Topdanmark. If P&C reported the best ever 9-months combined ratio of 85.9%, this without the positive one-offs in earlier years. Based on this strong development, we have also announced the lowest ever guidance for the combined ratio 85% to 87% for the full year. The underlying trends are also very strong. In the retail segment, the number of customers is growing in all markets, as are the customer satisfaction KPIs.
Given the strong numbers and the underlying trends, we have decided to distribute an all-time high internal dividend of SEK 6 billion in December from If P&C to Sampo P&C. It is also worth noting that our reserve strength has, in general, stayed at the same level or slightly improved. At the same time, the efficiency measured in cost ratio continues to improve as planned. Our new subsidiary, Topdanmark, also announced the best ever combined ratio for the first 9 months at 81.9%. It is also worth noting the size of tops life's -- Life operations as their gross written premiums were highest ever at EUR 850 million, and the unit-link volume exceeded that of Mandatum Life. Topdanmark also announced that they are looking for a new CEO. Nordea's third quarter numbers were soft.
However, the value creation path is very interesting. In the foreseeable future, Nordea's digital retail offering will be able to differentiate itself from an, otherwise at present, very homogeneous set up. This will also pave the way for the low 40s cost-to-income ratio as Nordea has communicated earlier. On the corporate side, the bench strength is key, and given the composition of their Nordic teams, the bank will continue to be the preferred choice in the Nordic corporate sector. Wealth management is not growing at the same pace as it used to, but given its size, the numbers are still impressive and the value creation model is intact.
All in all, a very strong capital generation, forming a basis for a gradual increase in dividend for Nordea as well. Mandatum saw its gross written premiums exceed the volume of the corresponding quarter last year, and it has paid an extra dividend of EUR 150 million in September to Sampo P&C. In my opening remarks, I wanted to mention the internal dividend streams, as this gives more clarity to the fact that we remained a dividend stock with gradually increasing dividends to our shareholders also in the future.
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Jarmo Salonen, Sampo Oyj - Head of IR & Group Communications [3]
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Thank you, Kari. And ladies and gentlemen, we are now ready for the questions, please.
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Questions and Answers
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Operator [1]
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(Operator Instructions) And we'll take our first question from Matti Ahokas with Danske Bank.
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Matti Ahokas, Danske Bank Markets Equity Research - Head of Equity Research of Finland [2]
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Two questions, please. Firstly, regarding the internal dividends, which I think was very useful that you provided the information, also regarding If. But obviously, we don't -- we will not know the dividend proposal of Nordea yet, but should we expect that you will pass that through to Sampo shareholders in its entirety or not? And the other question is regarding the premium growth in If. Obviously, Sweden has been the main driver, but is it -- could you maybe, Kari, elaborate a bit on was it the private or industrial segment or which part of the Swedish business you saw most growth during the first 9 months?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [3]
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Thank you, Matti. I'll take the first one. Whether we pass through dividends or not from our subsidiaries or associates, it is not really relevant because what we strive for is gradually increasing dividend for our shareholders. So I more use these examples to demonstrate that we have ample resources to continue to gradually increase our own dividend.
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Peter Johansson, Sampo Oyj - Group CFO [4]
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As to the growth, in Sweden it was actually in all 3 business areas. Maybe I can highlight that it was primarily new and more customers rather than changes in prices or increased prices, but it was all business areas.
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Matti Ahokas, Danske Bank Markets Equity Research - Head of Equity Research of Finland [5]
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Just if I may have a follow-up also. Could you give us the same information regarding Norway. How was that split?
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Peter Johansson, Sampo Oyj - Group CFO [6]
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In Norway, there is growth in private and to some extent in commercial. The industrial part is such a small piece of the Norwegian business, but I actually don't recall what the development was on a year-on-year basis.
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Operator [7]
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And we'll take our next question from Paul De'Ath with RBC.
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Paul De'Ath, RBC Capital Markets, LLC, Research Division - Analyst [8]
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Couple of questions, please. And going back to the internal dividends point. And so firstly, just on the Life dividend, so the extra EUR 150 million that's been paid up in September, and I guess, can you give us any indication of how to think about this going forward? Is this a complete one-off? Is this something you would expect to do on a semi-regular basis? And believe me as the capital rolls off the Life business, but -- and just kind of to get an idea of what to expect going forward will be good. And then secondly, also on dividends, please, on the If P&C dividend, you say this is a record level. Should we pencil in this as this is the new kind of payout ratio for If going forward? Or how should we think about it? Is there any kind of one-off within the number?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [9]
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I think that Mandatum dividend was a one-off. And we have a history of distributing the dividend in the spring. Of course, the only remaining question is when Danske pays the EUR 340 million for the portfolio in 2018, would that then require an additional one-off, but I think it's too early to speculate on that. But this, as such, was a one-off, and then we go back to ordinary dividends in the spring. On If P&C, I would say that given the strength of the result, this is a conservative level of dividend, and there is no reason why you should read anything one-off in this.
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Operator [10]
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We will take our next question from Steven Haywood with HSBC.
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Steven Haywood, HSBC, Research Division - Analyst [11]
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On your recent investments, I see Denmark is obviously a key market for you now, and you've invested in Saxo and in Nets. Can you give us a bit more information about why Denmark is quite interesting to you? And why Saxo and Nets are interesting propositions? What do this offer in terms of future growth dividends and opportunities for Sampo? And then just on the P&C side, on the corporate business, now that Topdanmark has lost all of its corporate clients, have you -- has If been picking up any of Topdanmark's corporate clients over the last few years?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [12]
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I think that it's a coincidence that the 2 significant investments that we did in the third quarter were in Denmark. We normally describe ourselves, for our international shareholders, as a proxy for the Nordic financial market. I suppose that given our financial strength and that we are known to be quick and no hassle decision-makers, all deals are shown to us. For many years, we haven't done really that much because there has been so much uncertainty in the regulatory framework, which has affected our risk appetite and also has affected the valuation of the targets. These 2 came simultaneously more as a coincidence. Of course, all Nordic capitals have significant knowhow basis in the financial sector, and Copenhagen has especially a very significant talent pool. So it’s natural that there are good investment opportunities. Nets is an industry that we know really well, and there we are a passive investor together with a private equity fund. The private equity fund is in the lead. We expect that to return, which is in line with what private equity industry, in general, returns to their shareholders. So it's around 20% IRR, which is the target of the private equity industry, in general. I don't want to mention about this case specifically. Saxo is a little bit different because Saxo is one of the few fintech unicorns in the Nordic sector that have a global reach, and we were impressed by the trading platform and the technology behind that. We were impressed by the quality of the software and, of course, the people. We see that there is a very strong trend supporting our investment in Saxo because it's clear that it's not worthwhile for many financial institutions to develop own proprietary software for trading. And we see that the company has significant possibility to do much more white labeling. So as a now owner, we want to support them to improve their global reach and become clearly a software-based fintech company. It's an excellent platform for that. As such, I think that Saxo is going to develop well in the coming years, and we have based our investment case on that. Our return on equity target for these type of investments is above 17.5%, and our base case is well above that. There is also, of course, a small optionality in Saxo, and that is something that comes with the new main owner Geely. Geely bought, as you are all aware of, 51.5% of the company, and we are honored to participate in this endeavor with Geely. There is a great potential for the trading platform in Asia, and we are really curious to see what -- how Geely can support Saxo in their Asian operations. We haven't calculated this into our investment case, so the Chinese market or things like that, that would be an extra plus. But tech fintech-wise, we are impressed by what they do, and we are happy owner once the deal closes.
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Peter Johansson, Sampo Oyj - Group CFO [13]
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On the Topdanmark question, they are active in the retail segment and in small and medium commercial, not really in large corporate. So they have not really affected a large corporate market in Denmark. Then Jarmo gave me the number for industrial Norway, where we actually had a small growth also for our industrial business or large corporate business in Norway.
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Operator [14]
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And we'll take our next question from Vinit Malhotra with Mediobanca.
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Vinit Malhotra, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [15]
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Just one thing remaining for me, sorry. On the bond side, I think -- I mean, there is a U.S.-fixed income impairment. And given that Sampo is usually not in these high risk zones, could you just comment a bit about whether it's a concern, whether it's something that is completely one-off or -- comment a bit about that?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [16]
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Yes. We have a one-off -- a write-off in the fixed income portfolio in If for roughly SEK 400 million, and it's from the oil and offshore industry. Our high-yield portfolio has had a very good yield in 2016 and '17. So this is an old historic case, which we wrote off now. No change in the risk profile of the fixed income portfolio in If as such.
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Peter Johansson, Sampo Oyj - Group CFO [17]
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And mark-to-market, it has all the time been on the negative side in the AFS portfolio. So mark-to-market, it didn't change much.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [18]
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Exactly.
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Operator [19]
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And we'll take our next question from Blair Stewart with Merrill Lynch.
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Blair Thomson Stewart, BofA Merrill Lynch, Research Division - Head of the UK and European Insurance [20]
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I have a couple of questions. Firstly, I know you don't really like talking about underlying combined ratios, but here we go anyway. If you strip out the reserve releases completely and also adjust for the large losses, I think there was a 1.5 percentage point improvement for the 9 months versus the 9 months, last year. I just wondered, is there something structural there? Is it perhaps just an element of good luck with low frequency? Or I wonder if you could just comment on that aspect. Secondly, I'd be interested in your view, as a significant owner in Nordea, what were your own thoughts on the somewhat disappointing Q3 and the outlook for you as an owner? And finally, if I can, I just wondered on your updated thinking on debt leverage capacity at Sampo?
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Peter Johansson, Sampo Oyj - Group CFO [21]
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Okay, let's start with the combined ratio. No, they haven't changed. Underlying is a difficult subject. 1.5% improvement sounds a bit on the high side to me. If I compare 9-month to 9-month, we've seen very good weather this year, no real events. We have seen positive development in smaller claims -- frequency claims, so fair enough. That is an improvement this year compared to last year. We see better business momentum. We see higher growth now compared to last year. So yes, there is an improvement. I wouldn't put it at 1.5%; that sounds high to me.
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Blair Thomson Stewart, BofA Merrill Lynch, Research Division - Head of the UK and European Insurance [22]
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So there's elements of good luck in there with regards to frequency, I guess, would be the answer, am I correct?
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Peter Johansson, Sampo Oyj - Group CFO [23]
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Also, good luck is a difficult concept, but fair enough. Let's call it, good luck.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [24]
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Okay. On Nordea, I think, that the main thing for me was that the communication was unclear. I think that somehow Nordea succeeded in confusing 2 things in their communication. The first thing was that earlier Nordea had communicated that their costs in 2016 -- 2018 are going to be on the same level as 2016. And then when they came out with their new restructuring program, I think some people in the market interpreted that they are not delivering on the first promise, so now they have some kind of smokescreen here in front of us. From an owner's perspective, I think that we are quite firm that we want them to deliver on their first promise, definitely. So we want to see that the underlying costs in 2018 are on the same level as 2016. Then there is completely a different issue, which is what they are going to do long term when the investments are bearing fruit, and they're able to change their offering to a more digital offering, when they are able to decrease the sizes of their branches or change the composition within their branches. And then they say that, "We are going to decrease 6,000 persons out of which 2,000 are consultants, and we are going to bring the 2021 costs to the same level." It's once again the same number, EUR 4.8 billion. And I think that from an owner's perspective, we are now investing EUR 1 billion in a very scalable business, where a huge bank is transforming to a much more digital offering. So of course, we want to see a payback on this investment. And one form of the payback is that the structure of the employees will change and the number of people involved will change because so many things are going to get more automatized. And therefore, I think that both programs should deliver. And we are, of course, as owners, fully committed to transform the bank in such a way that these cost measures are met. Then another thing which I think that is interesting that there is no Elon Musk in Nordea, because no one wants really to lean forward and promise something they are not able to deliver. If Elon Musk was running this bank, he would already have told how the bank will deliver completely different client experiences in 2021. But even if I'm not Elon Musk, as an owner, I think it's clear that with this investment, Nordea will take a quantum leap compared to the Nordic banking scene. If you today visit a Nordic bank, the offering is pretty much the same in all banks. If Nordea makes these transformational change, it will be easier and more convenient and more mobile to interact with Nordea than with other banks. And that's the goal what they want to reach. And of course, Casper has many a times said that his ambition is to take the cost income ratio in the private sector to the low 40s. So all in all, if this is delivered then, as a rule of thumb, I would say that the bank should make EUR 1 billion more in profits.
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Blair Thomson Stewart, BofA Merrill Lynch, Research Division - Head of the UK and European Insurance [25]
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Great. Very interesting. I guess, the answer on debt leverage is, it depends.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [26]
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Yes, debt leverage, I think that, yes, we have still room. Peter can, modeling-wise, give you an answer. I use a number which is between EUR 1 billion to EUR 2 billion, if necessary.
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Peter Johansson, Sampo Oyj - Group CFO [27]
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Yes, I think that's a good ballpark because we still have plenty of hybrid capacity available in the group.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [28]
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But then, of course, in order to do that we have to find something really attractive. And you have been, Blair, following us such a long time that you don't always find something. So we are patient hunters and disciplined.
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Operator [29]
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And we'll take our next question from Wajahat Rizvi with Deutsche Bank.
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Wajahat Rizvi, Deutsche Bank AG, Research Division - Research Analyst [30]
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Wajahat Rizvi from Deutsche Bank. Two question for me, please. Firstly, some of your mutual peers in Sweden and Finland are offering, we've seen, bundled products and going down the route of vertical integration, like, building their own hospitals and things like that. On that basis, can you comment on the competitive dynamics from this longer term? Secondly, the solvency ratio was a little shy of our expectations. I understand some of this is from Topdanmark consolidation. Can you please provide some color here, please?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [31]
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I think the first question we could try it together with Ricard to comment on it. I take a more general view, and we are insurance and banking nerds. We know nothing about hospitals. So I am not very keen on seeing this group expand into areas where we cannot be best-in-class. Our philosophy is to be involved in the Nordic financial sector, where we can be -- have a market-leading position, where we can have clearly bigger, scaled benefits than our colleagues and where we can have a high retail content plus a high degree of automation and have a digital offering. We are probably one of the biggest buyers of this services. So I think that it's going to be very interesting to be in the -- procuring these services in the future. And I think that, that will maximize the shareholder value for our shareholders. But please, Ricard?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [32]
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I'll maybe add to that. We have had mutual or semi-mutual competitors in all of our markets for as long as we've been around. And I think with the market as they develop with more digitalization, more automatization, more regulatory demands, that's actually to our advantage as a large nonmutual. So I don't really see the competitive scene changing. And when it comes to competitors or to customer demands, I don't see mutuals being in a better place than what we are.
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Peter Johansson, Sampo Oyj - Group CFO [33]
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On your solvency question, I don't know which company you referred to. But Mandatum -- basically, even if we took the EUR 150 million out from Mandatum, it's still has roughly twice the regulatory capital, so significant buffers. If we made the dividends decision of SEK 6 billion, so that has already been deducted from the solvency numbers. And on group level, when we consolidate Topdenmark, we take it with a standard formula. And that, in practice, means in the conglomerate model that there's a small drop in the solvency ratio.
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Wajahat Rizvi, Deutsche Bank AG, Research Division - Research Analyst [34]
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Sure. Also, just on top, if you don't mind if I follow-up. So they do have a approved partial internal model. Are you not allowed to include that in your numbers on internal model?
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Peter Johansson, Sampo Oyj - Group CFO [35]
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For the time being, when we calculate the group solvency, we have to use the standard model, both from If, even if If has approved. Partially internal model for Sweden, and now we did the same with Topdanmark. But I think that we'll start discussions with the regulator that this is somehow unfair. So -- but let's -- I don't promise you anything because the regulators are never easy on these things. So I think that we should be -- the right thing would be that we could also use their partial internal models when we calculate the conglomerate solvency.
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Operator [36]
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Our next question comes from Youdish Chicooree with Autonomous Research.
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Youdish Chicooree, Autonomous Research LLP - Research Analyst [37]
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I've got 2 questions, please. The first one is in relation to the investments you made in Saxo Bank and Nets. I mean these investments were primarily funded by excess liquidity in Sampo P&C. So I was wondering if the right opportunity comes along and the return of the IRR are as attractive as you mentioned, would you consider modifying your asset allocation in If P&C and Mandatum and do the investments from these units? Secondly, it was just on your dividend guidance. You talked about gradual growth in dividend, but I was wondering, just to help us, from our expectation, do your -- when thinking about that include the dividend you are going to expect from Topdanmark early next year?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [38]
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We don't really think from where the dividend is coming, and I don't really want to bore you with saying that our dividend should be esthetically beautiful curve, but when you -- you tempt me to do it. So I think that our dividend history is such that we just wanted to grow gradually and it should be pleasing to the eye. So regardless from where the internal dividend streams comes -- and I think that we are well-positioned to gradually increase the dividend in the coming years. I didn't really get your point on the investments in Saxo and Nets. Peter, can you help me out here?
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Peter Johansson, Sampo Oyj - Group CFO [39]
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If we would find something else to invest in -- so it would be a long road where we would have to change the investment allocation in If and Mandatum. So if we find something else to invest in, it will be -- still be business as usual in Mandatum and If because we have so much excess capital.
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Youdish Chicooree, Autonomous Research LLP - Research Analyst [40]
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Okay. Now because at the moment your allocation to alternatives, like, BT or real estate or any other asset class is quite low in your insurance business. So I was wondering with your risk appetite improving, whether you are more comfortable to take more risk in those businesses?
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Peter Johansson, Sampo Oyj - Group CFO [41]
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In If, we have always been more conservative on investments because we want to save the cash flow coming in from If. So normally, we have taken more risk in Mandatum, which -- investment risk because there -- it's a nonrated entity. So we don't -- that's the reason why we use more Mandatum's balance sheet.
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Operator [42]
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We will take our next question from Michael Huttner with JPMorgan.
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Michael Igor Huttner, JP Morgan Chase & Co, Research Division - Senior Analyst [43]
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Just 2 questions. Just going back to the combined ratio. Maybe you've answered it before, and apologies, if you have. The thing I noticed is that Sweden got so much better Q3 versus Q2, so 83% versus 90%. I just wondered if you could help us out and explain what you see is the right sustainable figures? And then the other question on, solvency, so asking what my predecessor asked in a slightly different way, you've done those 2 deals, which reduce solvency a little bit. There's a bit of extra capital required at the level of Sampo P&C. How much more would you have room for, I mean, how many more deals like this can we expect in the short or medium term? And then finally on Nordea, the discussion was so good, but it was famed, as I understood, it must be in earnings. And at the Investor Day, your Investor Day, you focused or [indiscernible] said that the dividend of Nordea could grow not just by $0.01 or $0.02 a year but by more. Is the focus on earnings now meaning that you're slightly not focusing so much on the cash?
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Peter Johansson, Sampo Oyj - Group CFO [44]
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So I'll start with the combined ratio for Sweden. So Q3 was a strong quarter. You shouldn't read too much into it. It's volatility and large claims, some prior year gains. So well, -- and again, no events during the third quarter.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [45]
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Okay. On the solvency side, I think that we partly answered this question already earlier. From the parent, from Sampo P&C, we still have room to make investments up to EUR 1 billion to EUR 2 billion, if necessary. So that's the framework where we have room to maneuver. But it's highly dependent on whether we find anything that meets our risk, reward and return criteria. On Nordea, I can assure you that we are as concentrated on cash as ever. However, I don't think that I should communicate anything else than Nordea is communicated on the dividend. And Nordea has communicated that their ambition is to have a gradually increasing dividend, going forward, which should leave the dividend guidance of Nordea's dividend to them.
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Michael Igor Huttner, JP Morgan Chase & Co, Research Division - Senior Analyst [46]
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And the solvency on both?
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Peter Johansson, Sampo Oyj - Group CFO [47]
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About Nets and Saxo, together the total capital effect on the holding company level on Basel III rules is less than EUR 100 million.
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Michael Igor Huttner, JP Morgan Chase & Co, Research Division - Senior Analyst [48]
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And this is an investment that totals about EUR 300 million for the 2 together?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [49]
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The investment is EUR 500 million or EUR 495 million.
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Michael Igor Huttner, JP Morgan Chase & Co, Research Division - Senior Analyst [50]
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EUR 500 million? EUR 400 to EUR 500, I beg your pardon?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [51]
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Yes, so less than EUR 100 million is capital consumed.
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Operator [52]
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(Operator Instructions) We will take our next question from Thomas Seidl with Bernstein.
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Thomas Seidl, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [53]
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Three questions, quick ones. First, the cost ratio in P&C keeps on improving. And in light of your comments, Kari, on the bank side, can technology bring the cost ratio of If below 20% in the midterm, is my first question. Secondly, in the past you have mentioned Life is not particular business you like. Now with Topdanmark, you get a Life portfolio, which has more spread in the business than Mandatum. I wonder what you view is on Topdanmark's Life portfolio, is it something you would like to develop? Or is it something you want to trim back to the business you like, which is mainly unit-linked. And the third question is on If. If I do remember correctly, you said Norway competitive pressure is coming down and now you say growth is 1.7% on constant FX. Does this mean we should expect more growth of this? Or is 1% or 2% the maximum you could get out of Norway?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [54]
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May I start with the cost ratio. I just say that we don't give long-term guidances on cost ratio. We have said that our job is to make the company more efficient year after year. And therefore, we not knockoff one day sale or something every year. So that -- and I think we continue with that even if the world is becoming fully digital. Or if -- do you disagree or agree, Ricard?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [55]
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I agree. I agree.
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [56]
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You agree. Then on the Life, we are not really super Life enthusiastic. I think that the unit-linked business is a fee business. And that we, of course, like because it's a high ROE business. Where we have been quite skeptical is the weak profit business. However, the way Topdanmark is running their Life business, I think it's super professional and conservative. So as an owner, we support the management decisions that they have taken in regard to their Life business.
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [57]
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On the Norwegian market, it is true. Currently, we see the Norwegian market as better than in some time. Having said that, to forecast growth is difficult. It's a combination, of course, of what claims inflation we will see, competitor actions and possibilities in the market. So I will not give a forecast on growth, but what we saw in Q3, the market was more stable and more calm than in some time.
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Operator [58]
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We will take a follow-up from Blair Stewart with Merrill Lynch.
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Blair Thomson Stewart, BofA Merrill Lynch, Research Division - Head of the UK and European Insurance [59]
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Just a quick one. Any update on the timing of the completion of the Life book disposal? Sometime next year?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [60]
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Yes, sometime next year, most likely. Towards the end of the year, of course.
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Operator [61]
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And we'll take a question from Ida Gjosund with Carnegie.
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Ida Melvold Gjosund, Carnegie Investment Bank AB, Research Division - Research Analyst [62]
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I have 2 questions, please, both to you, Ricard, on the If P&C. Firstly, on the combined ratio, in industrial, there is a worsening of 17 percentage points year-over-year. What are the drivers of this? And also some of your competitors have started price increases in this business area, especially in Norway. Do you find this necessary as well in If P&C? And secondly, on large claims, they are EUR 31 million higher than expected this quarter. Are there any particular events or products that drives this up this quarter?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [63]
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Let's see, combined ratio in industrial as always affected by large claims. So the volatility you've seen in industrial is coming from the large claim situation. Second on price increases, Norway, as I understood your question. Yes, in parts of the business, we did premium increases in Q3, more tilted towards the commercial side of the business. Again, what we will see going forward is difficult to comment on but I don't see any sort of dramatic need. I don't think our top line will start to increase as a result of premium increase to any large extent in the Norway, but of course, we have to monitor this situation. Thirdly, large claims. In both commercial and industrial, if I comment on the first 9-month, very traditional large claims, meaning, fire, property related claims. So nothing really out of the ordinary.
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Ida Melvold Gjosund, Carnegie Investment Bank AB, Research Division - Research Analyst [64]
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Okay. Just for clarification, so no price increases in industrial Norway, currently, at the moment?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [65]
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That market isn't really homogenous enough to comment on as a market. But no, I don't expect -- if I comment the corporate market or the industrial market, Nordic'ly, I don't see currently any real push up in prices.
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Operator [66]
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And we have a follow-up for Michael Huttner with JPMorgan.
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Michael Igor Huttner, JP Morgan Chase & Co, Research Division - Senior Analyst [67]
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Just like Blair Stewart asked on the Mandatum Life deal, you gave in August the sensitivity of the Mandatum solvency ratio to the deal, which is plus-15 or plus-20 points, depending on where you take the with or without transitionalization. Could you say how much the benefit would be at the level of the group, please?
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Ricard Wennerklint, Sampo Oyj - Deputy MD of IF P&C Insurance Holding and MD of IF P&C Insurance Ltd [68]
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On the group level, it's not big. But it's a couple of hundred million euros extra for Mandatum Life. So it's a big number for Mandatum, but on group level, it doesn't -- if we have a capital buffer of EUR 4 billion, it doesn't move the needle so much.
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Operator [69]
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(Operator Instructions) And we'll take our next question from Per Gronborg with SEB.
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Per Gronborg, SEB, Research Division - Research Analyst [70]
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I came a little bit late, so sorry if the question already has been asked. You now have 2 segments operating in the same market. Any source about consolidating your Danish P&C operations? There must be some synergies to harvest?
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Kari Henrik Stadigh, Sampo Oyj - Group CEO, President, MD and Chairman of If P&C Insurance [71]
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No plans whatsoever. The synergies are smaller than the market thinks. Both companies are extremely well run. So no plans.
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Operator [72]
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And we currently have no questions in the queue. I'd like to turn it back to today's speakers for any additional or closing remarks.
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Jarmo Salonen, Sampo Oyj - Head of IR & Group Communications [73]
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Thank you, operator. Ladies and gentlemen, thank you for your attention, and have a very nice evening.
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